Ryan blasts ‘big-government’ states

House Speaker Paul Ryan of Wis., holds up a copy of a proposed "simple tax" postcard while speaking at the Heritage Foundation in Washington, Thursday, Oct. 12, 2017. (AP Photo/Susan Walsh)Susan Walsh

In this Oct. 11, 2017, photo, President Donald Trump speaks about tax reform during an event at the Harrisburg International Airport in Middletown, Pa. Trump's tax overhaul package is getting resistance from an unusual alliance of interests opposed to his plans to scrap the federal deduction for state and local taxes. (AP Photo/Alex Brandon)Alex Brandon

By MARCY GORDON and KEN THOMAS Associated Press

Thursday, October 12, 2017

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WASHINGTON — The top House Republican on Thursday blasted high-tax states that deliver billions to the federal government as he faced a backlash from rank-and-file GOP lawmakers over a sweeping tax-cut proposal.

Speaker Paul Ryan went on the offensive against high-tax states like California, New York and New Jersey, even though disgruntled GOP lawmakers from those states need to be brought on board to support the $6 trillion tax overhaul. The Republican lawmakers from high-tax states oppose the plan’s proposal to repeal the popular federal deduction for state and local taxes.

But Ryan contended the rest of the country is “propping up profligate, big-government states” that levy high taxes on their residents and spend recklessly.

“States that got their act together are paying for states that didn’t,” the Wisconsin lawmaker said at an appearance at the conservative Heritage Foundation.

In fact, California, New York and New Jersey send many billions more in taxes to Washington than they get back in federal spending, new data show. Divided by total state residents, New York gets back 81 cents for every $1 it pays in, New Jersey receives 74 cents and California 96 cents, according to an analysis released last month by the Rockefeller Institute of Government.

New York contributed $48 billion more in taxes to the federal government than it received in government spending — the biggest deficit the analysis found. New Jersey gave $31 billion more in taxes than it got back and California $17 billion more, the data show.

The state-local deduction is claimed by around 44 million people and costs the government an estimated $1.3 trillion in lost revenue over 10 years.

Opposition to ending the deduction has produced an unusual alliance of the Republican lawmakers from high-tax, Democratic-leaning states; state and local government officials; public employee labor unions; and business groups like Realtors. Wary of the financial pinch their constituents and members could sustain from losing the deduction, they are pressing the Trump administration to reconsider.

“This is really almost like a life or death issue for districts like mine,” said Republican Rep. Peter King, who represents a district on Long Island. “This cannot be called a rich district. It serves a lot of middle-income people.”

With Republicans splintered, the future of the tax overhaul plan is threatened by GOP defections, even as the success of the package is a political imperative for Republicans who have pinned their hopes on notching a big legislative achievement to help them retain control of Congress in next year’s elections.

Rep. Chris Collins, R-N.Y., warned Wednesday that the affected states would need some “accommodations” to go along with eliminating the deduction for state and local taxes paid, possibly a cap on how much could be deducted.

Some opponents contend that repealing the deductions would subject people to being taxed twice and would amount to a federal revenue grab on the backs of homeowners who pay property taxes.